Indian Parliament to Mull Bill Proposing National Digital Currency

India’s supreme financial regulator, the Reserve Bank of India (RBI), banned trade in cryptocurrencies in 2018. However, the ban was overturned by the Supreme Court last year, after many aggrieved investors approached the top federal court for relief.

India will introduce a new law that seeks to ban “private cryptocurrencies” in the federal parliament's looming winter session, according to an official document.

The legislative agenda for the winter session - scheduled to begin on 29 November - lists among 26 new laws set to be discussed by Prime Minister Narendra Modi’s government, 'The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' .

The Bill, once passed into a law, “seeks to prohibit all private cryptocurrencies in India”.

“However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” reads the document.

Further, the new law also envisages establishing a “facilitative framework for creation of an official digital currency”. Like India's paper money, the official digital currency could only be issued by the RBI.

The development comes after a heated debate around regulating cryptocurrencies in India. The world’s fifth-largest economy is also one of the fastest-growing markets for the digital currency, expanding by 641 percent this year.

According to cryptocurrency exchanges, more than 100 million Indians are involved in the trade, with currency worth a total of around $80 billion.

In spite of its growing popularity, Indian regulators have been expressing concerns about cryptocurrency trade. RBI Governor Shaktikanta Das expressed his concerns this month that the digital currency posed a “serious concern” regarding macroeconomic and financial stability.

"We have given our detailed suggestions. As far as I know, the matter is under active consideration of the government and the government will decide," said Das, while speaking at a summit in answer to a question on how the Indian government was dealing with the "unregulated" cryptocurrency market.

Prime Minister Narendra Modi, while addressing the ‘Sydney Dialogue’ on 18 November, also warned of the perils of cryptocurrency trading.

"It is important that all democratic nations work together on crypto-currency and ensure it does not end up in the wrong hands, which can spoil our youth,” stated Modi, addressing the Australian event virtually.

Indian authorities and banks have regularly cautioned investors and urged them to exercise “due diligence” while trading in cryptocurrencies.

India’s finance ministry said in 2017 that it did not consider cryptocurrency “legal tender or coin”, and warned that all measures would be taken to eliminate the use of crypto assets used in the financing of “illegitimate activities”.